Japan MOF panel seeks greater deficit cuts to meet fiscal goal

TOKYO- Japan should aim to trim the country's primary budget deficit by more than its initial target of some $40 billion each in the coming two fiscal years as a step to meet its budget balance goal, a key advisory panel to the finance minister said on Friday.

Tokyo is committed to halving the budget deficit, excluding debt servicing costs and new bond sales, by the fiscal year to March 2016, and achieving a surplus by fiscal 2021 to fix its tattered public finances.

With public debt at twice the size of Japan's $5 trillion economy - the highest in the industrialised world - Prime Minister Shinzo Abe must steer a delicate balance to stimulate near-term growth and rein in public debt in the long run.

Abe is overseeing Tokyo's most ambitious effort in recent memory to recharge the world's third-largest economy after nearly two decades of stagnation.

With the Bank of Japan embarking on a massive asset-buying campaign since April to spark inflation and the government ratcheting up spending to stimulate growth, experts have urged the government not to ignore the mounting debt pile.

In October, Abe decided to implement the first stage of a two-step plan to double the tax on consumers to cope with ballooning welfare costs.

Tokyo plans to raise the sales tax in April to 8 per cent from the current 5 per cent to pay for social security in a fast-ageing society. The panel has also sought the smooth implementation of a further tax hike to 10 per cent in October 2015 as planned.